Business Journal Q&A: Exchange Bank president looks ahead

NORTH BAY – Exchange Bank last week reported an $11.5 million loss for the third quarter due in large measure to sour construction loans. The bank said it was moving “decisively” to identify and deal with the problem assets and return to profitability. <br> Bill Schrader, who was appointed president of the $1.7 billion institution after the departure in August of CEO Barrie Graham, attributed the loss to an “epic real estate collapse.” The bank board of directors voted in September to suspend dividends for the first time in more than 60 years. The bank didn’t pay a dividend from 1931 to 1946. Mr. Schrader, who previously was the bank’s chief operating officer, has been with the institution for 30 years.<br> “The bank has been around for 118 years,” said Mr. Schrader. “We have weathered two world wars, an earthquake and the ‘80s. We will put this in our rearview mirror as we go into 2009.”<br> Mr. Schrader earned a bachelor’s degree in business administration and economics from St. Mary’s College in 1972 and an MBA from Golden Gate University in 1973. He worked as assistant national bank examiner for the Comptroller of the Currency until 1978 when he joined Exchange Bank as a loan review and compliance officer. He graduated from the Pacific Coast Banking School in 1983.<br> During the 30 years he has been with the bank, he has served as assistant vice president, vice president, senior vice president and executive vice president. He has been chairman for the YMCA in Sonoma County and is chairman for National Alliance for the Mentally Ill’s Napa Chapter. Mr. Schrader was interviewed by the Business Journal and had this to say about the bank, how it got to where it is and what the future holds.<br> <h3>Q. You were planning to retire but decided to step in as president. Why?</h3> A. I’ve been with Exchange Bank for 30 years, and I take great pride in what the bank has done in the community. The bank means too much to me to turn my back on it now, so I’ve put my retirement plans on hold indefinitely so I can continue to contribute my leadership and experience. I have tremendous confidence in the future of this bank. With our talented, expert staff, I look forward to returning the bank to profitability and being a top performing bank again.<br> <h3>Q. Can we expect to see the Doyle scholarship for Santa Rosa Junior College students – which is funded with bank profits but was suspended in September – reinstated in the near future?</h3> A. We are making every effort to return the bank to profitability and begin paying out dividends to all our shareholders again. Reinstating dividends will mean that the bank is consistently profitable again with solid asset quality. This is the highest priority for all of us.<br> <h3>Q. Will charitable giving be impacted?</h3> A. There will be no negative impact on the bank’s generosity to the many nonprofit organizations we serve in the community. We pride ourselves in the amount of time, talent and ‘treasury’ Exchange Bank donates in every market we serve.&nbsp; Our donation budget will be the same in 2009 as it was in 2008, and our leaders continue to serve on many boards and as volunteers in hundreds of local organizations. Community commitment is one of our core values – it defines who we are, regardless of the balance sheet or the economy.<br> <h3>Q. What steps are being taken to reverse the losses? Where and what are the distressed assets?</h3> A. The losses originate from about 10 percent of the loan portfolio and are primarily confined to residential construction loans in Sacramento and Sonoma County. We are monitoring the credit quality and taking prudent reserves against future potential losses and reviewing our lending practices in specific communities and making adjustments as necessary. We continue to work cooperatively with troubled borrowers.<br> <h3>Q. Sacramento was hit particularly hard. What steps are needed to be taken to recover?</h3> A. Yes, Sacramento was hard hit. Suffice it to say, we are not making further construction loans in Placer County at this time. We are monitoring these credits closely and working with our borrowers cooperatively.&nbsp; We have to look at balancing the need to serve our communities with far-sighted and prudent risk taking.<br> <h3>Q. How long will recovery take?</h3> A. Even economic experts don’t know when business conditions will fully turn around. We have every confidence that we will return to profitability in the coming months, and our business will continue to improve as the economy improves.<br> <h3>Q. Was expanding outside of Sonoma County a mistake?</h3> A. At the time we decided to expand outside the county, it was because Placer County was one of the fastest-growing regions in the state. Sonoma County’s population growth had been relatively flat for a number of years. We saw the need to diversify and the exciting opportunity to be part of that dynamic growth and thus complement our presence in Sonoma County. Nationally recognized banking experts confirmed the opportunity and advised us to expand into Placer, so we all thought it made a lot of sense at the time. Unforeseeable events, including the epic real estate collapse, proved otherwise.<br> <h3>Q. To what do you attribute the bank’s success for 118 years?</h3> A. Since the bank began, there has been a wonderful partnership with this community. Our employees provide an extraordinarily high touch level of service; they know their customers and are deeply involved in community activities, both personally and professionally. Our people are committed and very connected to those we serve. We love our communities, and they’ve loved us back.